MarketingMarketing IndexIndex NumbersNumbers

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Dr. P.V. (Sundar) Balakrishnan

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z Index number development is a basic marketing tool.

z The Index Number

z Index numbers are statistics used for comparing.

? enable marketers to make many comparisons quickly and easily.

? Index numbers can be utilized many different ways

z Using Index Numbers for Selecting Segments

z most frequent uses for index is to compare consumer product usage with a population base, to better understand the ratio and/or relationship between the population and the usage of a particular product or service.

Balakrishnan

S #2

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Research study of consumers who use frozen pizza:

Ages 35-44

Total population of potential users (household decision makers) in the age group (000)

12,512

Number of product users in the age group (000)

8,132

55-64

10,905

4,780

*Base = 74,975,000 total decision makers **Base = 37,791,000 total product users in the decision maker group

Balakrishnan

S #3

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z Calculate the index numbers for age group 35?44, compared to 55?64:

Ages

Total population of potential Number of product users (household decision users in the age makers) in the age group group (000) (000)

35-44 55-64

12,512 10,905

8,132 4,780

*Base = 74,975,000 total decision makers **Base = 37,791,000 total product users in the decision maker group

Balakrishnan

S #4

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Research study of consumers who use frozen pizza:

Ages

Total population of potential users (household decision makers) in the age group (000)

Percentage of the total population in the age group

Number of product users in the age group (000)

Percent of all users of the product as a percent of the total user base

Index Number

35-44

12,512

16.7*

8,132

21.5**

129

55-64

10,905

14.5*

4,780

12.6

87

*Base = 74,975,000 total decision makers

**Base = 37,791,000 total product users in the decision maker group

Balakrishnan

S #5

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Total potential buying population, aged 35?44, divided by the total population in the age group: 12,512/74,975 = 16.7%.

Number of users (based on marketing data) aged 35?44, divided by the total number of users: 8,132/37,791 = 21.5%.

The index number thus is the percent of household decision-makers aged 35?44 (21.5 %), divided by the percent of population 35?44 using the product (16.7%).

21.5%/16.7% = 129 (index number).

Balakrishnan

S #6

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Research study of consumers who use frozen pizza:

Ages

Total population of potential users (household decision makers) in the age group (000)

Percentage of the total population in the age group

Number of product users in the age group (000)

Percent of all users of the product as a percent of the total user base

Index Number

35-44

12,512

16.7*

8,132

21.5**

129

55-64

10,905

14.5*

4,780

12.6

87

*Base = 74,975,000 total decision makers

**Base = 37,791,000 total product users in the decision maker group

Balakrishnan

S #7

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z Index Suggests that the 35?44 group is a better marketing target than the 55?64 age group.

? Although the marketer may observe this by studying the raw data alone, it is much easier to see the difference when the two segments are compared on a basis of 100.

? (One group is 29 points higher than 100, although the other group is 13 points below 100).

? It is obvious now that the 35?44 group is a much better target because that group has a propensity to consume more and is a larger-size market.

Balakrishnan

S #8

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z Brand Development Index (BDI) and

z Category Development Index (CDI)

z

for planning marketing strategy in geographical markets.

z The BDI is based on a brand's percent of total U.S. sales in a market, compared to the population expressed as a percent of the total population

z

BDI =

Percentof totalBrandsalesin market"x" x100

Percentof U.S.Populationin market"x"

z The CDI is calculated much the same way as the BDI except that the dividend of the equation is the sales for the entire product category as a percent of total U.S. category sales.:

z

Percent of total Category sales in market " x"

CDI =

x100 Percent of U.S. Population in market " x"

Balakrishnan

S #9

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Market

Percent of U.S. TV Percent of Percent of

households*

Brand

Category

Sales

Sales

Atlanta district

10

San Francisco

15

district

12

9

12

18

BDI CDI

120 90 80 120

? The Atlanta market the brand is selling well even though the competition, reflected in the CDI, is not doing well.

? On the other hand, San Francisco is a market where the brand is not doing well, but the category is doing very well.

? The analyst should develop a strategy to determine whether brand sales can be improved in San Francisco and perhaps bring sales up to the category level

? Another strategy is necessary for Atlanta, perhaps a focus on maintaining

the good sales position with strong personal selling and sales promotion

efforts.

Balakrishnan

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Combine BDI and CDI to Examine Descriptors of the (e.g.) High CDI / Low BDI cell

CDI

LOW

HIGH

LOW

1.

2.

BDI

HIGH

3.

4.

Finding: Consumers in Cell #2, mostly live in the South-Western U.S. The firm

may want to allocate more resources to this geographic region (descriptor)

Balakrishnan

S #11

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